Preventing ‘Pig Butchering’ Scams: A Modern Investment Fraud

Published: May 15, 2024 by Alex Lvoff

The world of finance can be a dangerous place, where cunning schemes lurk in the shadows, ready to pounce on unsuspecting victims. In the ever-evolving landscape of financial crime, the insidious ‘pig butchering’ scam has emerged as a significant threat, targeting both financial institutions and their clients.

What is a ‘pig butchering’ scam?

‘Pig butchering’ scams are named after the practice of farmers fattening up their livestock before “butchering” them. This comparison describes the core of ‘pig butchering’ scams, where criminals entice victims to participate in investment schemes and cryptocurrency fraud.

Originating in Southeast Asia and now rampant in the United States, these scams often start with online interactions via social media or dating applications. Scammers build trust with the victim, eventually gaining access to their online accounts. They “fatten the pig” by enticing more cryptocurrency investments and then make off with their ill-gotten gains.

The repercussions are staggering, with reported losses exceeding $3.5 billion in 2023 alone according to an AP News article, and around 40,000 victims in the United States, including cases of losses as massive as $4 million.

The real-life impact

The story of “RB,” a San Francisco man who engaged with a scammer named “Janey Lee,” serves as a stark warning. Through social media, Janey orchestrated an elaborate scheme, promising “RB” substantial returns in cryptocurrency investment. Seduced by false promises, “RB” emptied his life savings into the scam, only to be rescued by a Federal Bureau of Investigation (FBI) intervention, narrowly avoiding financial ruin.1

Malicious actors are improving their targeting skills, and often pursue executives and victims with a large sum of money, such as C-level officials from financial institutions. This past February, a $50 million pig slaughtering fraud incident caused the CEO of a local bank in Kansas to lose all his funds and the bank to collapse a few months later.

FinCEN’s vigilance and updates

The Financial Crimes Enforcement Network (FinCEN) remains vigilant, issuing advisories to financial institutions to combat ‘pig butchering’ scams. Their latest advisory highlights evolving scam tactics, including aggressive promotions, using money mules for illegal fund transfers, and leveraging new financial products like decentralized finance (DeFi) platforms to obfuscate transactions.

FinCEN also warns about red flags such as large and sudden investments from older customers, quick fund withdrawals after big deposits, and the frequent use of coins or mixers that hide transactions. Financial institutions are encouraged to:

  • Report any suspicious activities by using specific terms like “pig butchering fraud advisory” in their reports to make analysis and response easier.
  • File suspicious activity reports (SARs) using the key term “FIN-2023-PIGBUTCHERING.”
  • Guide potential victims to report to the FBI’s IC3 or the Security and Exchange Commission (SEC’s) reporting system.

A call to action for financial institutions

The fight against ‘pig butchering’ scams requires proactive measures from financial institutions:

  • Enhance fraud detection and anti-money laundering (AML) programs: Implement robust systems compliant with regulatory guidelines, conduct thorough customer enhanced due diligence, and leverage fraud detection software to spot anomalies and red flags., and leverage fraud detection software to spot anomalies and red flags.
  • Leverage data analytics: Utilize data analytics tools to monitor customer behavior, identify irregular patterns, and swiftly detect potential ‘pig butchering’ activities.
  • Employee training: Educate employees on scam risks, fraud detection techniques, and FinCEN red flags to empower them as the first line of defense., and FinCEN red flags to empower them as the first line of defense.
  • Community education: Educate customers on recognizing and avoiding investment scams, promoting awareness, and safeguarding their assets.

Navigating challenges with effective solutions

‘Pig butchering’ scams cause not only money losses but also personal troubles and reputational harm. Awareness, learning, and cooperation are essential in protecting from these complex financial fraudsters, securing the safety and confidence of your institutions and stakeholders.

By combining the best data with our automated identification verification processes, you can protect your business and onboard new talents efficiently. Our industry-leading solutions employ device recognition, behavioral biometrics, machine learning, and global fraud databases to spot and block suspicious activity before it becomes a problem.

Learn more

1San Francisco Chronical (2023). Crypto Texting Scam

*This article includes content created by an AI language model and is intended to provide general information.

Related Posts

Learn what a TOAD attack is and effective measures you can take to safeguard your organization. Read more!

Published: June 6, 2024 by Alex Lvoff

Experian’s award-winning platform now brings together market-leading data, generative AI and cutting-edge machine learning solutions.

Published: May 22, 2024 by Julie Lee

“Learn how to learn.” One of Zack Kass’, AI futurist and one of the keynote speakers at Vision 2024,...

Published: May 22, 2024 by Stefani Wendel